Required Rate of Return

Suppose r_RF = 3%, r_M = 8%, and r_A = 6%.

1. Calculate Stock A's beta. Round your answer to one decimal place.

2. If Stock A's beta were 0.9, then what would be A's new required rate of return? Round your answer to one decimal place.

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- As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose r_RF = 7%, r_M = 11%, and b_UT = 1.5.

1. Under current conditions, what is r_UT, the required rate of return on UT Stock? Round your answer to one decimal place.

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Your retirement fund consists of an $8,000 investment in each of 15 different common stocks. The portfolio's beta is 1.50. Suppose you sell one of the stocks with a beta of 0.9 for $8,000 and use the proceeds to buy another stock whose beta is 1.8. Calculate your portfolio's new beta. Do not round intermediate calculations. Round your answer to two decimal places.

Portfolio Required Return

Suppose you manage a $4 million fund that consists of four stocks with the following investments:

Stock	Investment		Beta
A	$200,000		1.50
B	400,000		-0.50
C	1,000,000		1.25
D	2,400,000		0.75

If the market's required rate of return is 11% and the risk-free rate is 6%, what is the fund's required rate of return? Do not round intermediate calculations. Round your answer to two decimal places.

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